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Fear of Floating in Turkey

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  • Ilyas Siklar
  • Taner Sekmen

Abstract

Many emerging markets have adopted floating exchange rate regimes after currency crises. Turkey has experienced a floating regime since 2002 combined with inflation targeting. The aim of this paper is to investigate the ¡°fear of floating¡± phenomenon, named by Calvo and Reinhart (2002), in the transition to a low and stable inflation environment in Turkey before and after inflation targeting. The results demonstrate that the levels of exchange rate pass-through decreased substantially, thus weakening the ¡°fear of floating¡± phenomenon in Turkey after inflation targeting. Therefore, we argue whether any reactions of the central bank to foreign exchange rates imply the ¡°fear of floating¡± or the ¡°fear of inflation¡±

Suggested Citation

  • Ilyas Siklar & Taner Sekmen, 2015. "Fear of Floating in Turkey," Business and Economic Research, Macrothink Institute, vol. 5(2), pages 288-307, December.
    • Handle: RePEc:mth:ber888:v:5:y:2015:i:2:p:288-307
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    References listed on IDEAS

    as
    1. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 379-408.
    2. Choudhri, Ehsan U. & Hakura, Dalia S., 2006. "Exchange rate pass-through to domestic prices: Does the inflationary environment matter?," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 614-639, June.
    3. Frederic S. Mishkin, 2004. "Can Inflation Targeting Work in Emerging Market Countries?," NBER Working Papers 10646, National Bureau of Economic Research, Inc.
    4. Reginaldo Pinto Nogueira Junior, 2009. "Inflation Targeting and Fear of Floating in Brazil, Mexico and South Korea," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 10(2), pages 195-209.
    5. Carmen M. Reinhart, 2000. "The Mirage of Floating Exchange Rates," Annual Proceedings, The Association for the Study of the Cuban Economy, vol. 10.
    6. Reginaldo P. Nogueira, Jr. & Miguel A. León-Ledesma, 2011. "Does exchange rate pass-through respond to measures of macroeconomic instability?," Journal of Applied Economics, Universidad del CEMA, vol. 14, pages 167-180, May.
    7. Juan F. Castro, 2004. "On the Reasons Behind Fear of Floating: Pass-through Effects vs. Contractionary Depreciations," Working Papers 04-02, Centro de Investigación, Universidad del Pacífico.
    8. Barry Eichengreen, 2006. "Can Emerging Markets Float? Should They Inflation Target?," Chapters, in: Matías Vernengo (ed.), Monetary Integration and Dollarization, chapter 8, Edward Elgar Publishing.
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    11. Nogueira Jr., Reginaldo P. & León-Ledesma, Miguel A., 2009. "Fear of Floating in Brazil: Did Inflation Targeting matter?," The North American Journal of Economics and Finance, Elsevier, vol. 20(3), pages 255-266, December.
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    More about this item

    Keywords

    Inflation targeting; Exchange rate; Fear of floating; Turkey;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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